Word On The Street
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Lehman Debacle
The traders discussed a report from the Wall Street Journal that said Lehman Brothers Holdings (LEH) is considering raising $3 billion to $4 billion in capital. Macke said Lehman could have some serious problems and its troubling that the company has to keep telling investors how liquid it is. Najarian said put options activity in the Financial Select Sector SPDR (XLF) and Lehman Brothers was heavy today. However, he said that Lehman probably isn’t another Bear Stearns (BSC). Finerman said Lehman an access the discount window to get more liquidity, but such a move could take the stock lower. Adami advised viewers to avoid the stock because he thinks it will trade lower.
Oil to $100?
The traders talked with Joe Terranova, chief alternatives strategist at Phoenix Investment partners about his take on crude oil Terranova explained that oil traders will be watching the weekly supply report due out Wednesday morning. He thinks crude will trade down to $120 and the action will get very exciting. If it breaks $120, he said oil could move down to $115. Terranova disclosed he is positioned bearish on oil by being short Hess (HES), long Sunoco (SUN) and long Southwest (LUV) as well as long the Canadian dollar and long Goldman Sachs Group (GS). He said he plans to hold this position until June 10th-15th then remove it. Once he pulls this trade off he said he will be looking at getting long natural gas and steel for the second half of the year.
Dennis Gartman On Commodities
Is the world running out of food? The United Nations said today that world food production will need to rise by 50% by 2030 to keep up with demand. The traders spoke with strategic investors Dennis Gartman about his take on the news. Gartman said he thinks the UN estimate could be low. He explained that consumer’s incomes are rising and people want to eat higher quality food. He said innovations in the “AG” complex will help to meet the rising demand and he remains bullish on commodities. Gartman warned investors that in the short-term commodities could come under selling pressure due to increased regulation from lawmakers in Washington. New legislation could cause corn to fall by a dollar and send oil back to $100. However, in the long-term he sees commodity prices heading higher.
Options Activity
Pete Najarian noticed some unusual options activity in a few stocks Thursday. He said Goodyear (GT) had extremely heavy action in the July $25 call options. Najarian explained that traders are playing GT options off of strong international sales for General Motors (GM) and Ford Motor (F). He also pointed out heavy action in the July $75 calls for Nucor (NUE).
Hurricane Trade
The traders discussed some retailer and insurance stock plays for the hurricane season which starts this week. Currently, 8 storms with 110 mile-per-hour winds are expected to make hit shores this season. Adami said look at Allstate (ALL). Najarian recommended investors wait for the insurance stocks to fall first if the storms hit. He noted that is what typically happens and that is when you want to buy names in the sector. He also said investors should consider Gulf Island Fabrication (GIFI) for a play on off-shore drilling platforms if a hurricane hits the gulf. Macke said the best retailer play for a busy hurricane season is Home Depot (HD). He said sell any retailer that blames weather for its problems.
POPS&DROPS
POPS- Dell (DELL) popped 3% after Goldman Sachs Group raised its PC forecast for 2008. Adami said buy the stock on a pullback. Schering-Plough (SGP) jumped 3% after the company said one of its vaccines will double the survival tome of a brain cancer patient. Najarian said the news is great for the stock. SanDisk (SNDK) added 6% after the chipmaker launched a line of flash drives for ulta-low cost PCs. Najarian said SNDK is rocking. Garmin (GRMN) vaulted 5% higher on no news. Finerman said the company had a presentation at an Oppenheimer conference and they must have said some good things.
DROPS- Boeing (BA) dropped 4% after the company was hit with a negative court ruling. Macke said he isn’t excited about this stock. Children’s Place (PLCE) fell 3% ahead of Thursday’s May retail sales data. Finerman said buy it back under $30. Lululemon (LULU) slipped 6% after the retailer reported full-year earnings below Wall Street estimates. Macke said expenses are hurting LULU. MasterCard (MA) dropped 4% after credit card issuer announced it will pay a 15 cent dividend. Adami said he likes MA at $300.
Trader Radar
Shares of State Street (STT) were among the most actively traded stocks on the NYSE Tuesday.
Final Trade
Macke said short the Dow with the Short Dow30 ProShares (DOG). Adami selected Celgene (CELG). Finerman recommended Aetna (AET). Najarian said buy Norfolk Southern (NSC) on a pullback.
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